If the second hand market isn't addressed, developers will simply stop making retail product, says Guillaume de Fondaumiere

Quantic Dream believes that the company lost between €5 and €10 million of royalties due to the second hand sales of influential PlayStation 3 title Heavy Rain.

The second hand sales were fuelled by the last recession, said co-founder Guillaume de Fondaumiere, where high games prices forced consumers to seek out cheaper deals in the overpriced AAA market.

"I would say that the impact that the recession had, especially on AAA games on console, was the rise of second hand gaming. And I think this is one of the number one problems right now in the industry," he told GamesIndustry.biz in an exclusive interview.

On my small level it's a million people playing my game without giving me one cent.

Guillaume de Fondaumiere, Quantic Dream

"I can take just one example of Heavy Rain - we basically sold to date approximately two million units, we know from the trophy system that probably more than three million people bought this game and played it. On my small level it's a million people playing my game without giving me one cent. And my calculation is, as Quantic Dream, I lost between €5 and €10 million worth of royalties because of second hand gaming."

While he sympathises with the consumer who is faced with expensive titles, he also said that the simple problem is that developers will stop making games if they can't recoup a profit, which harms all areas of the ecosystem in the long term.

"Now I know the arguments, you know, without second hand gaming people will buy probably less games because they buy certain games full price, and then they trade them in," said de Fondaumiere. "Well I'm not so sure this is the right approach and I think that developers and certainly publishers and distributors should sit together and try to find a way to address this. Because we're basically all shooting ourselves in the foot here.

"Because when developers and publishers alike are going to see that they can't make a living out of producing games that are sold through retail channels, because of second hand gaming, they will simply stop making these games. And we'll all, one say to the other, simply go online and to direct distribution. So I don't think that in the long run this is a good thing for retail distribution either."

He continued: "Now are games too expensive? I've always said that games are probably too expensive so there's probably a right level here to find, and we need to discuss this altogether and try to find a way to I would say reconcile consumer expectations, retail expectations but also the expectations of the publisher and the developers to make this business a worthwhile business."

The full interview with Guillaume de Fondaumiere, where he also discusses the developer/publisher relationship, why self-publishing is "idealistic" and why videogame ratings need a radical rethink, can be read here.

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The idea that all consumers would be happy to pay £40 for a game is one of the game industry's biggest errors of judgment.

The other one is thinking that market pricing is set by how much it costs you to make something (it isn't; it's set by how much the consumer is prepared to pay).

The second-hand market is a way in which many consumers can have high-quality titles at a lower price. Developers and publishers should spend more time paying attention to what the market is telling them, not bleating that they can't make $50m titles any more.

I doubt Gamestop and the big retailers are going to do something for the long-term stability of the retail channel if that means lowering their current revenues. Huge companies tend to be quite shortsighted in that sense, and their only umbrella for the future storm is having bought a second-class download channel (second class in PC, and with even no console game presence).

I think QD's problem was also helped by the fact that it's a linear, story-driven adventure, that totally loses value after the first playthrough, and multiplayer games tend to avoid that fate more often.

"On my small level it's a million people playing my game without giving me one cent." Maybe that should read "A million people who would not have otherwise played our game - and who may now be customers in the future".
I dont remember ever hearing any controversy about 2nd hand sale of books or CDs or DVDs or, well, anything else.

At least this time it's not about losses due to illegal downloads. Honestly, second hand exists since always, be it cars, bikes, computers (with installed software), even people selling games along with their console.
Ok, maybe you could've made 10 mils more if second hand market didn't exist. You could have doubled profits if Africa was a evenly rich place, Earth population was 14 billions and we had developed colonies on Mars. And if only all those stupid competitors would leave the industry and just get into some other business... how obnoxious of them. Frankly, GameStop is quite unpolite. But the worst is those stupid beggars that call themselves "customers" are so attached to their money that they prefer to spend less when they could spend more. It's recession time you guys, quit saving money and get some new 70€ game and forget about the rest!

I think Heavy Rain for many gamers would have been a 'risky purchase' at full price. Taking from the point Henry raised, the one million people that where unsure about the game both stylistically and from a game play perspective should be converted to first time buyers with Quantics next release.

It may have hit the wallet hard now but they pushed out in a new genre and did exceptionally well. I understand the disappointment at lost revenue but there is a strong silver lining.

Edited 2 times. Last edit by Andrew Robinson on 12th September 2011 11:48am

The truth is some poeple will never buy new, some people will never pay a premium price - there are many reasons so I wont go into as why but I think it is unfair to say the company 'lost' money as that model of clientele wasn't there initially.

"I think QD's problem was also helped by the fact that it's a linear, story-driven adventure, that totally loses value after the first playthrough"

To be fair, two playthroughs could end up very differently depending whether you succeeded in certain sections and what characters lived or died, so I think there was a good amount of replay value considering it was a linear story-driven game.

I do like Fondaumiere's comments though, and particularly the fact he's talking about the tough economy and different pricing as opposed to Online Pass-style initiatives (even though I think I'm broadly in favour of them these days). I also think a different pricing structure needs to be considered by publishers and retailers; while big budget games with millions of marketing dollars like Deus Ex 3 or Gears 3 will sell well at £40, lower-calibre releases like El Shaddai probably won't.

Also, as a closing thought, I wonder how many of those 1 million 'used' sales might have been rentals?

Edited 1 times. Last edit by Terence Gage on 12th September 2011 12:44pm

As mentioned by Gregory above, a £25-30 price range is what your average UK gamer will be enticed with. The retailers know this, the digital retailers even more so. As such, its chrulish to price it exhorbitantly when the average gamer is not going to be incentivised to put down a first day order purchase. This is probably why not many AAA games last beyond 1 week at number one.

As such, I'd suggest that for normal edition titles for consoles realistically retail (and help day one purchases) at

AAA titles retail at £29.99 RRP
AALite/Casual at £24.99

As extra incentives, all pre orders can have some extras at the same RRP. These can be a one time only digital download/activation to be used and reused with the same account throughout its series/dlc packs. This will reduced the desire for second hand sales (its unlikely the 2nd hand sales can be eliminated, so there should be alternate means to reduced its desirability)

I hate this assumption that consumers would pay full price if only second hand copies didn't exist. The same argument is often used when talking about games piracy and it's just as wrong there as it is here. Quantic Dream have "lost" nothing as those million users collecting trophies were never going to buy the game at full price at retail anyway.

Second hand is a tough area to complain about or make any real judgements on lost sales. Most products are sold second hand too, cars, mobile phones, games, films. On top of that, this game was considered a huge success..

The issue is not the existence of a second hand (pre-owned) market, but the fact that whilst retail benefits, the IP owners do not. Recitify this and the sector becomes a valuable part of the video games ecosystem.

Think of all the money magazine publishers are using from people reading them in the Doctor's office. Or how much money is lost when I lend my brother a DVD. Or I let my wife read the book I just read! The automobile industry must be crying over the Honda I just sold to someone - I pocketed all the money for myself. Oh also the Toshiba netbook I just sold on Ebay, I got a couple hundred from that, and Toshiba didn't get a penny. BILLIONS lost!

This complaining from the games industry is completely ridiculous. Why is Quantic so special? They aren't.

Isn't the obvious solution simply to lower the cost of new copies quicker after the initial release? A lot of people don't want to pay full price on release day so they wait around a few months, then pick it up from second hand bins for maybe 30% of the price 3-4 months later. I think a lot of those people would buy new copies if the price were lowered to perhaps 70% after 3 months and 40% after 6 months. Instead it often takes over a year before prices go down. After the initial rush of people who want to play the game ASAP have all bought it, the only people who remain are the masses who'd only be willing to buy the game for less, so price it as such and sell it to them as soon as he rush is over. Games would stay in the charts a lot longer that way. This is especially true of course for any titles which come with 1 time use codes for DLC etc.

1) As Guillaume says, new game prices are too high in most cases. While franchise blockbusters like CoD and long tail Nintendo fare like Mario Kart that's constantly advertised for years after release can command a premium price for a long time, most games (even a lot of major releases) drop to under £20 within a few months of release. But by the time they reach that impulse friendly price point, any editorial coverage and advertising they might once have had is long since gone, and it's probably almost impossible to find a new copy of the game in most retail stores (or if they do have any, it's one copy hidden away on a shelf at the back of the shop).

Personally I suspect a lot of games (particularly ones not attached to an on-going series or well known IP) would make more money if they were sold at £20 from day one. You'd get less money per unit, but you'd shift a lot more units and (if the game's any good) build more word of mouth because of that. If you're planning to turn the game into a new on-going franchise, that also doubles as an investment in potential buyers for future installments.

That's one of the attractions of digital distribution. By cutting out the retailer, you can sell at a lower, more attractive price point, but still get the same return per unit - the best of both worlds. Although sadly so far a lot of publishers seem to charge pretty much full RRP on digital downloads and just pocket the extra money, which is rather short-sighted.

2) Second hand sales might help fund future sales (although probably in a lot of cases that's more second hand sales), but I suspect they cost the industry a LOT more in lost first hand sales than it's getting back from that.

There's a big difference between used car or second hand record sales and second hand game sales. Game retailers actively push second hand product on people buying games in a way they wouldn't dare do with the music or movie industries. You don't walk into HMV and find half the store's music section filled with second hand CDs priced at only about 5-10% less than the new copies, and when you try to buy a new CD the guy at the till doesn't ask you if you want to save money by buying a used copy instead.

Also, linking back to the first issue, second hand games take up almost half the game software shelf space in stores like Game and HMV. Most retailers have (for each platform) a big chart section, a big second hand section, and one shelving unit for everything else. Which makes it even harder for non-blockbusters to get and maintain shelf space.

I have no problem with players trading in their old games at dedicated second hand stores or selling games on eBay. I've done that myself. But when major high street retailers are pushing second hand product over new copies to maximise their own profits, that's a whole different kettle of fish. It's going to kill their own market in the long run, and in the meantime they're unbalancing our entire industry and taking money out of the pockets of the people who develop and publish the games they're profiting from. Talk about biting the hands that feed you.

Wow, of all the places I didn't expect to hear the blindly ignorant, "I dont remember ever hearing any controversy about 2nd hand sale of books or CDs or DVDs or, well, anything else" approach. The second hand game market is pursued in an entirely different manner to those others mention, have you ever been into a book shop and seen signs up saying "Finish the new Darren Brown, and bring in back in 2 weeks for £5 trade in", or walked into HMV and seen the second hand DVDs lined up next to new ones for a mere £2 off, or been offered a second hand CD in place of the new one when you get to the counter. The games retail sector aggressively pursue this market as I costs them much less in trade-in store credit than a new game from the publisher, when they then push these onto the consumer at a minute saving of course developers have a right to be upset. I always attempt to purchase my games new, as I feel I have chosen to buy a product I should at least attempt to support the people who have made it, however this becomes increasingly difficult as major chains commonly stock from the publisher once, then hope to ride out the long tail on returns and trade ins. If the second hand market existed in the same ways as those of books, dvds, etc with small specialist stores providing people an opportunity to find old classics they missed out on the first time round then none of this would be a problem, but with the way things stand shame on you all.

Secondly, what irks me about the direction the games industry is going in is the notion that "I may have bought something, but it's still not mine". I pay for a t-shirt, it is mine. I want to wear it or cut it up and use it for poking out the top of molotov cocktails I can. I want to lend it to someone (prior to the cutting up, natch) I can, I want to donate it or sell it, I can. Because IT. IS. MINE.

I understand the entertainment industry's fear of piracy, but the concept of ownership can't be undermined. Unless of course you do it openly and head-on. You don't want me to 'own' this game, you want to give me a non-transferable activation code? Fine - but slash the price because you're curtailing my 'ownership'.

If you want me to pay full price (and I agree with the comments on console games being ridiculously over-priced), then give me ownership rights and accept that when I'm done with it I may sell it on.

BTW - On the subject of secondhand being a good promo tool. Back in the early (more copyable) days of PC gaming, I was lent or given copies of Half-Life, Doom, AvP, X-Comm and many more top quality titles. I couldn't have afforded to buy them at the time even if I had wanted to. Since then I have bought (usually at full-price) numerous sequels and spin-offs to those titles. Titles that perhaps wouldn't have been on my radar without those 'free' copies back in the day. It's also worth mentioning that I became an advocate for those brands - and you can't put a price on the value of word-of-mouth promotion.

Edited 1 times. Last edit by Jason Marchant on 12th September 2011 3:24pm

It's annoying how people always compare used software to the sale of used cars. It's NOT the same, if you buy a second hand car you're buying an inferior item, it's more worn out, the warranty has either gone or there's less time remaining on it, and it degrades over time. Software doesn't degrade, and when you buy it you're not paying for the disc or the box, you're paying for the rights to play that game. The IP is owned by the publisher and developers and retailers are effectively selling something that's not theirs. It's not far from theft in my view.

Also, @Nicholas Bennett, yes they are lost sales, or at least a good amount of them are, because if you try going in Gamestation or similar, they've got far more shelf space devoted to pre-owned games, more prominently placed, and I've even known staff try to convince me to buy a second hand version of the game instead of the brand new one I took to the counter. It's not just that the option is there, they almost hide the brand new copies in favour of second hand. It's not that people wouldn't pay full price (although I agree plenty wouldn't), it's just that most people would take a cheaper option if it's there, especially when it's rubbed in their faces so much.

I don't know the way rental DVD works but i guess its kind of like this..

Publisher licences copies x amount of copies of a game to be "sold" at the retail store. They can be returned by consumers within a set time whereby they can then be resold and it all starts again. After so long it can just be a free for all whereby the retailer takes over complete control and can do what they want with the discs? Consumers can even keep games they want and wont make any returns on it, but keep the media and "own" it forever! Win win for everyone?

No one wants to own games like heavy rain, they just want to play it and get rid of it. Why not cater to the way the audience wants to consume the media?

Films do it right... I go to blockbuster or lovefilm and watch loads of films that i would never want to pay the price of ownership for. Sometimes i like a film so much i keep it. And i pay the premium price for that privilege. This is the case 1/20 times though.. that's 19 films i still paid something to watch though where everyone made some money.

Game sales just seem to be stuck in the stoneage. I don't believe a digital only model is the right way to go at all.

I really don't think you can compare the resale of books or CDs with Games. I would say the money it takes to produce a book or CD is far less than it takes to make an AAA title. Furthermore I can tell you, having a musician in the family; they no longer make any money from record sales. I believe the music industry had to deal with that far earlier than the games industry, especially nowadays that people don't by full albums anymore and only single tracks on iTunes.

Magazine publishers see a declining number of subscribers because everybody gets the information for free in some way or another.

Even if you would offer your game cheaper in the first place, I doubt you would get rid of resale. It would just mean they are even cheaper. Developers/publishers need to find a way to profit from resale. Offering DLCs is one way but maybe it requires an even more creative solution to engage players for longer with the game. Look at the free-to-play titles. Players can play them for free, yet some of them still make loads of money because they offer the user the option to spend a small amount of money buying them some temporary advantage or enhance the game experience.

1) With 2 million sales I do not believe 50% of buyers sold their game secondhand after finishing. No other title has had 50% of it's sales turned in in this way.

2) QD Could have recouped all that money if it had released on PC too. Given Hard Rain was much more a PC game than a console game! In fact, on PC,I would not have been surprised if this title had sold over 3 million on PC!

Between what I believe false numbers, and not releasing on the gaming format most suited to the style I game, I do not feel at all sorry for QD.

In fact, I think many PC gamers anger at the industry is at companies like this, that release a successful PC title, and use that income from PC gamers to release their next title on console only!

Is it any wonder gamers don't give a damn about what publishers say when it comes to "lost profits"!!!

Basically there are millions of people driving around in cars right now and Ford don't get a cent from it. Ban second hand car sales. And houses too!

I jest of course.

But I really don't believe that you can sell titles for top price forever. I think the 'Platinum' range on PS3 was a great idea. That must help.

I think you just have to base your business model on 1.5 people buying a 40 pound game. We all know that a lot of gamers buy a full price game knowing that they will sell it on. If you took that away then be prepared to drop your prices to £25 ish.

Hmm I see the point of most of you. The thing is that I instinctively ignore the "bring in your game for 5€", as well as the sometimes ridiculous pricing of second hand games, so I was really talking about fair things. There's plenty of good games behind the furthest shelf as someone said, which only cost 10€ for example, while the new copy would cost 5 times as much if you can still find it at all. This is especially true on ebay.
I recall seeing a second hand Tomb Raider sold at BlockBusters (thanks God they closed for good) priced pretty much the same as the new one. I can't believe someone really bought it. They also had Tekken 2 for 5€, which was great.
In fact, I always wondered what kind of drugs they give to the retarded monkey that sets the prices. Come on, The Angel of Darkness was all but a good title, I can't imagine anyone paying 40€ for it, while Exit was far better and was sold at a far lower price. So I never imagined they were actually selling stuff, except for a few naive customers not knowing what they were paying for.
I have always put all those fishy offers in the back of my mind, so when we talk about second hand I never think about high margins, and I do think about high convenience for the consumer. I can't believe people really bring in three titles for a small discount, but this seems to be the point many of you are making so... the next question is: why do people fall for cheap tricks? (I still can't believe it's true tho)

This said, I think games should be accessible to most pockets. Most games are 13+ or 16+, and publishers can't always assume people have limitless resources. I wonder how many of you could afford to get a 50€ game when you were 13. That is, after getting a 300€ console with a 35€ joypad, plus a second TV set, since your parents might want to use the TV themselves from time to time. And EyeToy/Move/Kinect.

Actually back in the megadrive/SNES days games were always above £40, some I remember as high as £70. With inflation taken into account I think games these days are far better value for money. If people are happy paying £20 for a brand new blu ray movie, where they'll get a couple of hours entertainment, I don't see why paying £40 for something you'd get anywhere between ten to a hundred hours of entertainment isn't value for money.

The fact that games cost a lot to make is irrelevant. The consumer will pay as much as the consumer is prepared to pay. It is up to us, as an industry, to find a price point that works for us AND the consumer.

I agree that retailers are being short-sighted with their pre-owned strategy. But the margins are so much better for them that I'm not surprised. They are already in a conflicted relationship with publishers - they know that the publishers would rather not work with them and go direct, but they can't afford to yet. So publishers and retailers are two businesses whose current business model is dying, propping each other up while trying to eke out the maximum margin from this ailing business model.

Two reasons:
1) People don't realize the work behind a game; the average player just thinks it's natural that games are evolving, but they have no idea of the effort behind.
2) Most players are kids at school age, and this is not the first time I ask, I'd like to hear people here how much money they got monthly when you were 12-16 years old.

It's just a different audience, we all want to be rewarded after 2-4 years spent on a game, the industry is shifting towards a more mature audience, which allows for more money, but we shouldn't forget that games were originally for kids, we should still entertain kids, and kids are broke (except some lucky spoiled brat).

@Dave Herod,
megadrive/SNES games were sometimes that huge price due to the price of memory back them (cartridges). I don't think anyone pays £20 for a blu ray. It hasn't taken off hardly at all compared to how dvd performed and most are soon discounted to under £10.

Gentlemen,
Thank you for the animated debate. I won't answer each of you but here is my take on things with some more granularity...without insulting anyone :-).
There was a time when publishers and retailers together decided when it was the right time to drop a game's price. We had full price, mid-price and budget games and the whole value chain benefitted from this. That was also the only way to have different life-cycles for games, compared to films for instance.
Decisions to drop the price were based on consumer demand and levels of stock. Most importantly, price drops happened in a timely fashion. Gamers who couldn’t wait bought full price, those who weren’t sure waited some time, usually 3 to 6 months for the first price drop, and then again some time for the next. But each time a game was sold, companies which had financed and developed it made money, along with the retailer. Different marketing waves usually accompanied these different releases….
Today, second hand gaming (SHG) happens almost same day and date with the full price release. From far away, this may seem to be to the benefit of all in the chain, but actually it isn't. There is probably indeed no research to back my (and all of your) claims on SHG, but the fact that one party only in the mix benefits enormously from this "market pattern" should at least make us chew our arguments twice.
Also, I do not think that comparing VG to durable goods such as cars is relevant. However if one does, you will see that in the case of the second-hand market happening through the same distribution channels (there are only very few examples, cars being one indeed) then there is a mechanism in place to balance this distortion: distribution margins for new cars are very low, because it takes into account maintenance and used sales. Lower retail margin for initial release because of SHG isn't in place for games.
Back to games, this new market condition is the main reason in my view why only the "big guns"- the Top 15 games on each console nowadays (one of which was Heavy Rain last year) - sell.. Now I hear those of you who say "well then just create a top game or sell your crap online only". I think however the industry can be cleverer than that and not necessarily to the detriment of the consumer. I also believe our industry needs physical retail and diversity. Especially at a time when one development studio closes after the other. Guillaume

QD should also look into (what appears to be) the fairly widespread freezing/crashing issues of Heavy Rain. It could be a contributing factor to trade-ins when many gamers cannot even play the game they paid for.

I Platinum'ed the game, and am VERY saddened about the cancelled DLC but I still keep the game because I know how harmful 2nd hand sales are.

I think 2nd hand sales are to console gaming what pirating is to PC gaming. The only mistake is the companies targeting us to fix it, when they should be targeting the retailers, but I understand that's a rocky relationship as it is.

This is a tough nut to crack to say the least but opening a dialogue with retailers I believe is the first step.

Edited 1 times. Last edit by Hakki Sahinkaya on 12th September 2011 7:43pm

It seems stories like this are popping up more often and is one of the reasons we have elected to introduce a new retail concept. A concept that is very simple and aims to compensate publishers for second hand game sales. Current brick-and-mortar retail chains simply cannot do this due to the large overhead required to support their physical store models. We are planning to do what has been done many times before and that is to target a significant brick-and-mortar chain with a lower cost, online model which will allow us the benefit to survive off slimmer margins. Margins that will be cut back so we can rebate publishers for second hand game sales and also extend better trade-in credits to gamers. We are now starting to gain publisher support for this model which will be up and operational fourth quarter 2011 via an online store - ParcelGamer.com. Let the fun begin!

Edited 1 times. Last edit by Mike Kennedy on 12th September 2011 7:59pm

Just want to say this is very well said (see quote below). As someone who worked in Game for the festive season the amount they push second hand sales is mind boggling. The thing is that it did show how little people care about price to a certain extent though.
Most people when they were buying new-ish titles would just buy them new because the difference in price was so negligible that most would prefer a new copy at anything under £5 more expensive than a used copy.
Compared to that if a new copy was £40-50 and a second hand was £15-30 most people would buy the second hand copy. I know my maths and reasoning might be shaky here but to me that would suggest that the sweet spot for game pricing is around £30-40.

That said there are other issues which the industry doesn't take into account but at least the interview touches on some of them.

"I have no problem with players trading in their old games at dedicated second hand stores or selling games on eBay. I've done that myself. But when major high street retailers are pushing second hand product over new copies to maximise their own profits, that's a whole different kettle of fish. It's going to kill their own market in the long run, and in the meantime they're unbalancing our entire industry and taking money out of the pockets of the people who develop and publish the games they're profiting from. Talk about biting the hands that feed you."

Of course, Ford and other manufacturers of other items and works of entertainment do not have any IP associated with them at all, right?

Just like software patents should be invalidated.... this idea that software is "special" and should be given special status with regards to ownership of product needs to be addressed sooner rather than later. People, including you, keep confusing ownership of product with ownership of IP - these are completely different concepts.

As for my thoughts:

Similarly with other people here, some of these numbers will be friends and family playing (my cousins have a PS3 each and with their own gamer profiles too).... Is the industry trying to move towards a one-copy-one play future? I seem to remember that being tried once and it failing pretty badly. What was it called now? Oh yeah, DivX.

Where is the DLC he promised? I bought on release and enjoyed the game. I was waiting for DLC and was willing to pay, instead he cancelled the DLC and released another version of the game with move support.

"I can take just one example of Heavy Rain - we basically sold to date approximately two million units, we know from the trophy system that probably more than three million people bought this game and played it. On my small level it's a million people playing my game without giving me one cent. And my calculation is, as Quantic Dream, I lost between €5 and €10 million worth of royalties because of second hand gaming."

Considering he is making this statement without any solid proof, I'd say the numbers are significantly lower: people do BORROW games from friends, and play them - its how I have played the 10-15 360 titles I have played to date (not a single one purchased).

And this links in with 2 aspects of the game: does the game encourage people to play with their friends remotely (in this case no), and does the game encourage a lot of replays and/or have a lot of gameplay hours (in this case also no IMO).

If I had a PS3, I would also have played this - after borrowing it, not purchasing it 2nd-hand. I know that two of my friends who purchased this, played less than 5hrs (each) on the title.

So many of the critical comments here are simply variations of a rather simplistic "well, just make your game better, or do X and this won't happen". The implication that many seem to give is that if games were simply cheaper, or 'offered more longevity', then this wouldn't be a problem. Perhaps this is true, but it also seems to to totally ignore the cannibalistic behaviour of retailers. As someone has already said, they're very nearly undercutting DAY ONE sales. We all know what the sales curve looks like for big budget games. How could publishers view this as anything but an aggressive move?

As has been stated by others in this thread, yes, publishers and developers should adapt to market conditions. But look at HOW they're adapting.

Unfortunately for those of us who love big budget, narrative-driven or single player titles, developers and publishers are adapting to this in the only ways they know how - they are aping those franchises that have seemingly cracked the retention problem - Call of Duty, Halo, etc.

The problem from a consumer point of view is that this kind of tactic - multiplayer or service driven retention mechanics - is really only established in a small subset of genres. In the rest, you're going to see these features shoehorned in where they frankly don't belong (Kerberos network?). You're going to see content 'given' away to new copies to introduce added value to buying new. Sub-standard multiplayer added to games that used to be about the single player experience.

The rather hyperbolic nature of the original statement we're all debating here has provided plenty of straw men to attack, and a lot of FUD to cloud the air, but really, is it all that controversial to identify second hand sales as a problem? And really, for me as a consumer, it's mostly a problem because of the incentive it gives devs and publishers to prioritise some genres over others, and add spurious services and multiplayer to everything they can.

Apart from anything else, I see second hand sales as retail's last stand. It's been said before, but it really does look like physical media are on their way out.

He's complaining about losing money when in all honesty they didn't produce a great game, a good game maybe but it has zero replayability and is loaded with bugs. The (smart) consumer doesn't want to spend a ton of money on a game they know has glitches and thats all I found while playing Heavy Rain.

Before I rented the game I sat down with a friend he played through the first hour of the game and I figured out who the killer was he didn't believe me so I had him tell me after he beat it who it was and I was right. But I figured that a game like this where you have to make choices with every little thing you do that outcomes would change and maybe in a different playthrough the killer would be different, and nope same person. So that right there kills your replayabililty which also kills your chance of someone buying and wanting to hold onto it after they beat it. Also no DLC? Releasing DLC adds to the longevity of your title especially when it more lineare than you try to advertise it.

Maybe I'm just a jaded gamer but I really do not feel that the prices of games today are justified by their quality. So companies like Quantic Dream either need to lower their prices or actually invest the more time and do open beta tests to ensure that their titles are actually...good.

a) Retailers selling games as well as cars do indeed have fairly low margins for new product: while you may set your RRP to give them generous margins, you'll surely have noticed that nobody sells new games at RRP.

b) If used copies are turning up in any great quantities within days of release, that seems to me almost certainly indicating a problem with the game, not the used market. Do people really play through games that quickly? It seems more likely to me that these folks are treating this as the ability to, relatively cheaply, try the game, and then deciding that they're not satisfied with it. Would they have even tried the game without the used market to fall back on to recover some of their costs?

c) In SHG, not one party but two parties benefit from it: the retailers selling SHGs and the consumer buying them. The only one who doesn't obviously benefit, actually, is the developer.

Anyway, it seems to me that there's a not too difficult tactic you could try in order to handle this: do price drops on games sooner, with more frequency, and without announcement. You'll find that will capture a greater number of price-sensitive customers with new sales and also probably undermine the market of second-hand sellers to some degree since a price drop (unless it's a totally insignificant amount) will instantly devalue their used inventory of that game. In the long run, they'd have to start paying less for used games in order to sell them at the same price and make money.

Another option you could take a look at would be buying back used games yourself. There's clearly revenue to be made there, and it's hardly retailers' fault that you're letting them capture it.

2 million tines $20 is 40mill. That should have covered the cost of the game.
Leonardo paints the Mona Lisa, he gets paid, he moves on.
I can't see why any product is different. They all have a shelf life, and if a producer spends too much in development, overestimates the market, prices too low, makes a bad product, etc.. they take a financial bath.
Games development is entreprenurial risk taking, so it's not an arena for sulky babies. At least he has 2 million people who will buy the next installment, if the first was good enough. If I like a game, I keep going back to it, and I always try the next version
Guess i don't have much sympathy for people who try to (pointlessly, as the black market would just take over) build a case for regulation to distort the market, or threaten to take away 'their' ball unless everyone plays by their rules.

Releasing DLC may or may not add to long-term playability. I bought Mafia II used for about $20, and for that price it was a fine game. (Looking back now, I probably would have paid more--blame the Eurogamer review for my reluctance to try it.) But when faced with paying another $20 for two DLC chapters, I bailed and just sold my copy of the game to someone else. I would have paid $10, but it wasn't worth an unrecoverable $20 to play them.

1 mill lost sales?
Cry me a river, most dev's would love 2 million sales for a new I.P. by an unproven developer on that platform which is also an platform exclusive in a niche genre.Also a short single player only game that by being a murder mystery can only really be played once.And you got to double dip with the move edition and got loads of free PR by sony when they included the trailer on a lot of their movie dvd's.
Lost sales?How many people read the albeit glowing reviews but by the nature of the game, more or less an interactive movie and went to local video shop and hired it?How many borrowed of their mates?How many households have more than one psn account user?I work part time in a games shop and heavy rain sold really well in the first 2 or 3 weeks to an older,wealthier core demographic and didn't get traded much or bought 2nd hand much.
For the record I bought it new in the first week at near full price and still have it.Great game, but seriously stop whinging.

The best way to reduce second-hand sales is to make a game that people don't want to sell. If the second-hand shelves are filled with your latest games one week after release, that should tell you that the game is just not worth keeping and maybe many of those customers regretted the purchase.

Edited 1 times. Last edit by Luke McCarthy on 13th September 2011 1:40am

Stop selling products and start selling services. The secondhand market is a natural property of products.

Games are treated like products for a number of reasons.

1. They sometimes come on physical media (often unnecessarily).
2. Marketing dudes make consumers think they are buying AND owning a product. "OWN THIS GAME ON RELEASE". In reality the only thing they own is the disc the data is stored on. The game data on the disc is just along for the ride.

What this means is that the consumer looks at your "product" and thinks hrmm. Wow this game is treated like a product BUT it lacks a lot of the disadvantages that I am use to seeing in products.

For example I take a risk when I buy a second hand car. It's had some wear and tear on it's parts. A game disc however will either work or not work. Sure it could have some scratches on it that make it skip. But if it does you take it back and you get a replacement. You can't take your second hand car back and ask for it to work exactly as when it was new.

Car manufacturers don't complain about second hand sales because they know that their products depreciate in value over time. So a consumer buying a second hand car is doing so knowing he is getting less quality. Gamers look at the second hand market for games and do not see that decrease in quality. The disc is cleaned, data can still be read, it's practically identical to the new version.

You treat your game as a product at every level of development, production and distribution when the digital nature of games allow them to transcend being mere products. What do you expect consumers to do when they see two identical products at different prices?

On consoles, we have games ranging from 6h experiences to 100h experiences and they all have the same pricetag: 60€. Am I the only one finding that a bit strange?

Sure, one could argue that a 7h game can have far better production values to compensate for its short duration. But let's be realistic, the shorter a game is, the faster it gets passed on, the more it suffers from reselling. Human society is build on trade since the stone age, trying to change that with some sort of 21st century digital non-ownership scheme is not going to work. At best it means an oligarchy of service providers is going to screw over developers and consumers alike, while controlling both ends. Just think of Opec or how alcohol is distributed in the U.S at the expense of small distilleries.

Games without real ownership, ultimately have no value. iPhone games costs $1 for a reason, at that price point people do not have the expectation to own something for the rest of their lives. At $60 they do.

Nicholas is still spot on - we're witnessing two declining business models (traditional publishing and bricks-and-mortar retail sales) fight it out.

However, the right to re-sale is an establish right (referred to doctrine of exhaustion or first sale doctrine) that has been applied to goods for years. Art works are sometimes an exception. The issue is less clear with digital media because of the licensing issues.

Whilst the "used car" argument is obviously invalid, would anyone care to comment on how SHG are any different to second hand record music stores? The music on a CD is the same if it’s new or five years old. You don't see Madonna trying to get her withered claws on any of that money.

The language used by Guillaume de Fondaumiere is perhaps unfortunate. He did not "lose" any money, there is no way of proving that the claimed one million pre-owned sales would of ever resulted in full price purchases of Heavy Rain.

The pre-owned problem causes the biggest debates over on The Sixth Axis, some for, some against, but a lot of anger is directed at publishers for what many see as greed. Publishers and developers are damaging the industry with what appears to be simple money grabbing.

An example would be online passes. Customer A buys the new FPS shooter at full price from a retailer. They play online, have some fun. The cost of running the matchmaking servers etc is factored in to the original price of customer A playing the game.

Customer A now sells the game and it’s purchased by Customer B. Although it's a different person playing the game, it's still only one person playing online, there are no additional costs, no need for extra servers - so why does customer B have to pay an extra £9.99 for an online pass?

As for Dave Herod’s comments, although many of know we are buying a license to play the game, the vast majority of the public think that when they buy they game then it is their property, not a license. They are wrong, but you have very little chance of persuading them otherwise without legal action, something I’m sure everyone would like to avoid.

If someone from the industry could clearly explain why they deserve the extra cash from online passes and the second hand market rather than just complaining and imposing extra charges then you would gain an awful lot of respect and support from at least the core gamers.

Edited 1 times. Last edit by Paul Ledbury on 13th September 2011 10:34am

"Bricks and mortar" shops are on their way out anyways, the SHG market is just expediting their demise. They should be looking at ways to prolong their business rather than only caring about short term gains.

Just to address the T-shirt comparison. When you buy a T-shirt you own the material not the IP rights to the logo printed on it. IP is more valuable than cotton. In fashion that IP is a brand name (daft isn't it). In software that IP is the know-how on how to make a game that comes with decades of experience often. It's intangible but has serious value. PopCap don't make T-shirts but I bet you could sell a Plants vs Zombies T-shirt for more than a blank T-shirt. That's why a disk with some digital content costs more than a blank disk. When you buy a disk in a shop you pay for the materials and energy needed to physically manufacture the disk plus all the costs associated with getting the disk into the shop. Then there is the marketing of the disk which means you know it's in the shops. All this costs money. The publisher and developer also get their payment for the service of putting an interesting game on the disk but you don't own their IP just as you don't own the energy required to make the disk delivering the IP or the rights to use the logo on your Ted Baker polo shirt.

Paul - "Whilst the "used car" argument is obviously invalid, would anyone care to comment on how SHG are any different to second hand record music stores?"

You've answered your own question. Second hand music is generally sold in small independent second hand record stores that often sell little or no new product. Same for books and (for the most part) movies. You don't see HMV pushing second hand CDs, but like other major retailers they'll happily dedicate half their videogames shelf space to second hand items, and often actively encourage customers to buy a second hand copy rather than shelling out a couple of pounds more for a new copy.

Also, as I alluded to before, and as Guillaume mentioned in his comment above, this isn't just about taking money from game developers and publishers, it's actually distorting the entire market by making it harder than ever for anything but a handful of cookie cutter big budget blockbusters and the occasional breakout casual game to sell at retail in large numbers. As has been mentioned on this site before, pretty much everything in between is dying a death, even when they get great reviews.

I'd argue that part of that is down to the publishers, who insist on pricing unproven IP and mid-range games at a similar price to AAA franchise blockbusters, part of it is admittedly down to developers failing to adapt to changing conditions and customer expectations, but part of it is down to big high street retailers actively undermining the market to increase their own short term profits.

Many retailers offer their customers incentives to rush through our games as quickly as they can and then trade them in for something else, just so the retailers have enough second hand stock to kill off any "long tail" sales we might have got from word of mouth in the weeks and months after release. And they actively push customers who would otherwise have bought new copies of the game to save a couple of pounds by buying a used copy, giving the retailer a much bigger margin and the people who actually developed, published and funded the game nothing at all.

The fact that so many people here are blaming QD for second hand sales of Heavy Rain because they didn't include multiplayer, dozens of DLC packs, or some other means of extending the game's longevity is a sad indication of how effective this strategy is. Ironically, Heavy Rain actually had a lot of replay value. Sure, the murderer was always the same, but how you found them and what happened when you did could vary wildly based on the route you took. But a lot of players were probably too busy rushing back to the store to get the best trade-in deal to notice that.

People see games as disposable products. As soon as you finish a game you're encouraged to take it back to the store and trade it in for something else. Which might be good for the customer and the retailer in the short term, but it's not so good for the industry that provides them with those games in the first place.

Nice article but I would say the numbers aren't that high (just guessing). The trophy system doesn't distinguish different accounts in the same console (same copy) and people renting/borrowing the game...
I'm sure most were second-hand buyers but it doesn't necessarily mean it's bad. If I didn't know Heavy Rain neither any of the past projects from Quantic Dream, I'd probably buy some other guy and this one as second-hand (to try it out).
Who knows, maybe most of those second-hand buyers are now huge Quantic Dream fans and will buy, first-hand, the next games :)

Even if my previous statement is completely rubbish, the fact more and more costumers prefer second hand games means they see more value doing so. We can't just wait and complain that costumers are doing it wrong and this will kill the industry, etc. It's a legal market and as such, we just have to move on and find better ways to make this practice more profitable for game studios. Maybe it's the business model that has to change.
Although, I agree it must be frustrating for some studios when they don't have full control over the model but can't rely on it either.

EDIT: Second paragraph is more of a generic comment ;) Guillaume de Fondaumiere does seem to be up to do some changes.

Edited 1 times. Last edit by Diogo Neves on 13th September 2011 2:28pm

OK, so the problem is with retailers like GAME stocking up shelves upon shelves over pre-owned and pushing them over new games (GAME on Oxford St in London is terrible for that).

The problem is between retailers and publishers, not gamers. However with the inclusion of online passes the people being 'punished' are gamers, not retailers. It hasnt stopped the games being sold second hand, and usually without any additional discount to take in the need to buy a pass.

It does seem like gamers are suffering when the arguement - and solution - clearly lies between retailers and publishers.

Edited 1 times. Last edit by Paul Ledbury on 13th September 2011 3:47pm

@Paul Ding. Ding. Ding. It is between the retailers and publishers and yes, gamers are caught in the middle. These large B&M stores are controlling the market in a big and bad way and something needs to be done. And seeing that they will never bow down and cut publishers in on second hand game sales leaves the door wide open for a new retailer to come in and do just that. All while selling and conducting trade-ins on line with lower overhead. We are coming with the support of the publishers to do just that in the coming months. So should be an interesting time to see if we can change things for the better.

I never said we should ban second hand gaming. NEVER. I'm simply pointing to the fact that developers and publishers are not gaining a cent on second hand gaming and that in my humble opinion, this isn't the right model.
Some people ridicule my statement on Heavy Rain (which I only used as one example, and please read the interview, the figure in the headline is not exactly what I said), saying in particular I wouldn't know for sure how many games were sold through second hand. Well, you only need to look at the annual reports of certain retail giants to find out that between 30 and 40 % of total games software turnover comes from second hand sales today (incomparable to books for instance). Not to mention the fact that these contribute between 50 and 65% to their gross margin. So, I may be wrong on Heavy Rain, but the figures overall are in that range in the traditional retail console game market.
Now it is very easy to verify if these traded games have generated more full priced sales, the main argument of those who advocate second hand gaming: How have the sales trends new vs traded evolved in the past few years since traded games were introduced? Are we selling more new games today?

To be honest, I'm surprised that traditional games developers are finding it so hard to take the plunge and move away from traditional development / funding and sales models. From the point of view of retail it makes a great deal of sense to work with pre-owned games as, as de Fondaumiere points out, the margins are very much in their favour. If it is working in favour of retailers, then you can guarantee that it is not working in favour of developers and/or publishers.

I've been to far too many conferences and heard far too many traditional developers complaining about pre-owned games and wishing to return to some lost utopia of the 80s where publishers would pay for a team to develop a relatively small game that would generate vast royalties. It's not an argument you can 'win' by appealing to the better nature of players or retailers, those days are over and developers need to evolve and move toward digital models - look at the kind of success that is being enjoyed by some 'casual' developers. They will be the winners of this version of the games industry.

Essentially, de Fondaumiere's argument is that 'they' developed a product that couldn't reach 1/3rd of the potential market for that game and if de Fondaumiere had been in control of the route to market then they could have had a far better penetration.

Jon Irenicus, you say that I'm "a social case for [you]." I'm guessing that you mean that a consumer like me is a problem for game developers and/or publishers like you? I've spent about $1200 this year to date on gaming, and have bought about 30 games and DLC packs over the last six months. (Interestingly enough, of these, only 9 were used product, though this may be skewed by me buying more smaller games, e.g., PS Minis, this year.) This is the profile of the customer that's your problem?